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Dr. Costes had three years between undergrand and dental school to figure out what he was doing. Now he shares the unique principles he learned during that time, and how he's applying them to dental.
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VIDEO - Mark Costes - HSP #105
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AUDIO - Mark Costes - HSP #105
- B.A.in Psychology from U.C. San Diego
- DDS from Marquette, 2002
- It took 21 attempts and 3 years to get into dental school
- Opened six successful dental practices in first seven years of private practice
- Founded Horizon Schools of Dental Assisting, has expanded to over 130 locations
- Founded Dental Success Institute consisting of live events and dental business coaching
- Host of the Dentalpreneur Podcast
Howard: It is a huge honor to be interviewing, who I think is an amazing pioneer right here in my backyard of Arizona, Mark Kostis. We've known each other for a long time, and the reason that I want to get you on is, right now, a lot of dentists are like, "Oh my God, corporate dentistry, they are so organized. Solo practitioners, it's so hard." I can't think of anybody in my backyard, in the state of Arizona, that just came into dentistry and was focused on business and systems and organization and team building. Look at you, you're just Mr. handsome in a suit and tie. Mr. dapper. You're crushing it.
My first question to you Mark is, how is a solo practitioner going to compete against Heartland Dental, corporate dentistry, these big corporate chains who are sophisticated. A general dentist has to learn how to do Endo and filling and crowns and do marketing, and hire staff and do HR and do team building. How do you do it all? Tell them about your success first of all.
Mark: I think that I have an unusual story, because I got to learn a little bit about business before I got into dental school. It took me three years to get into dental school. I was a 20 time loser trying to get into dental school, so three years, on the 21st attempt, I got my single acceptance at Marquette University. 21 attempts, 20 rejections.
That left me with a three-year span in between undergrad and dental school, where I had to figure out what the hell I was going to do, so I started an MBA program, I had not yet to finish, because I got accepted halfway through, I got accepted at dental school halfway through. I was halfway through my MBA, could not get a corporate job. Go figure, a psychology major couldn't work in San Diego California.
Howard: Is that where you're from, San Diego?
Mark: I went to UC San Diego, that's where I did my undergrad.
Howard: Where were you born and raised?
Mark: I was born in [Patitski 00:02:15] New York, and then moved all over the place because my dad worked for IBM.
Howard: IBM stands for I've been moved.
Mark: That's right, and we were. I probably lived in six or eight different cities before the time I was 15 years old. We moved around a lot. In that time when I was getting my MBA, I couldn't get a regular job, so I bought a business. I bought a catering truck franchise believe it or not, a roach coach.
Howard: In what city?
Mark: In San Diego.
Howard: Okay. You mean one of those trucks where the good looking girls pull up and make you lunch, sell sandwiches, and tacos, and chips?
Mark: The only good-looking girl in my case, was Mercedes, who was about 55, and she had about four teeth, and she was my cook in the back of this thing, and I would drive from construction site to construction site. I bought a franchise, so I was the franchise holder of this catering truck, and it literally was entrepreneurship 101. I'm getting my MBA at night, and I'm driving a roach coach during the day, and go figure, the roach coach business is what really taught me a lot about managing overhead, marketing, all the stuff that's really important to run a dental office.
I had that benefit, so lucky me, it took three years to get into dental school, so that's a little bit of background and how I was able to jump start into dentistry. When I got out, I worked a year as an associate, right there in Phoenix, 32nd and Indian school. Then I got out, bought a practice with a partner. That partnership dissolved, and then I ended up building seven practices in six years.
Howard: Wow. I think of you as Prescott. People listening to this on our podcast, is about two hours north of Phoenix?
Mark: Yeah about 90 miles.
Howard: Yeah about 90 miles. Did you just think Phoenix didn't need dentists, it was too overcrowded, so did you go to smaller areas up north? How did you get to Prescott? I figure it was love or money.
Mark: It was actually opportunity is what it was. 2002 was a good time to be a dentist in Phoenix. Down in the Chandler area [inaudible 00:04:33] out by where you guys were, it was still pretty wide open. I could have made my way and done multiple practices down there, but my partner and I got together, my ex-roommate from dental school, we found this beat up practice up here in Prescott Valley, and decided that we could give it a shot, and within a year we brought that thing from $300,000-$1 million.
It was a struggle in the beginning, but I really fine-tuned the systematization of things. Once we figured that out, I looked for areas of opportunity where places were under served, or if there was a struggling practice I would acquire it and turn it around. That's a bit about the history of that.
Howard: Now now you own seven practices?
Mark: No, I'm on my seventh, I sold four. I simultaneously will be running three here in about a month.
Howard: Are they all up in rural areas in Prescott, or are they all over in Phoenix?
Mark: We have one in Chino Valley, Arizona, that's my big one. That does separate operatory practice. It's a town of about 11,000 people.
Howard: Frank practices up there doesn't he?
Mark: Frank Brady?
Howard: No, I thought there was a guy named Frank up there.
Mark: I can't think of any.
Howard: Miller? Anyway I'm sorry.
Mark: It's okay. I have one in Prescott Valley, and one that's being constructed right now in Prescott. I'm trying to build … I think I'll stop at 10, so there's three more down the pipe at some time.
Howard: Let me ask you this general question. What percent of the dentistry in America today would you say is big corporate chain like a Heartland, or Pacific dental, or something like that, Aspen? What percent was that when you got out of school? What percent is it now? Where do you think that's going to be in 10 or 20 years?
Mark: I would say it's probably currently around 25% or 30%. Am I overestimating? Do you know?
Howard: I hear it's 15% to 20%. You're saying 25% to 30%.
Mark: That's what it feels like in my area.
Howard: It's hard to get a definition, because when you say corporate dentistry, first of all almost 80% of all the dentists are incorporated, so then when you say group practice, a third are group practice, so then when you say group practice, multi location. I guess it really depends on the definition.
Mark: That's true. Some people would consider me corporate, because I have more than two.
Mark: It was much less when I got out in 2002, it's much more now. I think it's going to be much more in the next 10 years for sure. The writing is on the wall.
Howard: Do you think it will eventually be like Walgreens? Walgreens and CVC will have 90% of the market? Do you think Heartland or Pacific dental services, do you think one of them will be like a Walgreens where they'll have 25% of the market or something like that? Do you not think it will be not that extreme?
Mark: I'm sure hoping that it doesn't ... I'm sure hoping that it doesn't go to modernization of that level. I think they have a pretty firm grip right now. I think patients are more intelligent than we give them credit for, and a lot of them will fall to the initial bait switch tactics of the corporal giants, and get in there, but then when they see that they have to see a different dentist every single time, most of them are two days out of dental school, and then six months later they're gone. I think that patients want more of a home look.
Up in my area, I can't speak for all patients, but up in my area they want more stability, they want someone that's rooted in the community, they want somebody that has a track record, and I don't know how it is in the bigger areas where you are. I had one practice in the bigger area, that was in Scottsdale, that was the toughest one of all of the ones that I've had, but it's a lot different ballgame. It's a lot more competitive. You've got to do what you got to do to get patients through the door.
Howard: I believe that those red flags, because I'm 52, I lived through this before, the orthodontic dentist of America and a dozen trails on NASDAQ and they all disappeared, and the biggest red flag to me, is that if you're in the dentistry business, rule number one, you're going to have to keep your dentists stable. One of those corporate chains, their average dentists aren't even with them for a year, so you're not going to build a dental empire. I don't imagine Walgreens could be Walgreens if no pharmacist stayed with them longer than a year.
Howard: Another thing my son Greg pointed out to me, he said, "Dad look at the stats for the lawyers", because the lawyers started big corporate chains long before dentistry did. Right now, after their long run, half the lawyers are still independent lawyers, and the other half are in big chains. Having been doing business my whole life, there's a big difference between a firm where every time you call the accounting firm … That's why I left my accounting firms, because I got tired of dealing with a different account every time, and I went and found somebody that I could just talk to one guy and deal with an accountant.
I think my son Greg might be right in the fact that half of America probably is into a commodity, they only buy in price if their insurance says you have to go to this box to get your tooth fixed, probably will go there, but the other half is going to seek out quality, a relationship, stability, someone who knows their teeth, someone who knows their mouth. My last patient yesterday, Ted, he came in and said, "Dude, I'm so glad you're working out now, I hope you don't die because I don't want anyone else touching my mouth."
Mark: That's good to know.
Howard: I tried not to let him know I was chewing on a Twinkie at the time he told me that. I tried to pretend it was a piece of fruit.
Mark: Disguise it.
Howard: Disguise it.
Mark: Those are the type of patients that I want anyway, I want the other 50% that you're talking about. I don't want necessarily price shoppers, but sometimes you have to convert the price shoppers to the type of people that we want them to be, through value, through communication skills, what we have to offer in decommoditized dentistry.
Howard: You're a natural born leader, you're the full package, tall dark and handsome leader. I've seen you work with your staff. How do you create a dental team? Talk about HR, how do you find, attract your amazing team? You're not in Phoenix where you had 3 million people to pick from, you are in Prescott where you only had about 25,000 people to pick from. How do you hold them accountable in job descriptions? How do you do that so well? You do it well.
Mark: Thank you, I appreciate that. There's a couple of different things, there's recruitment, and then there's getting the best out of each employee. I think that operational systematization is how you do it. You have to have an airtight protocol manual. [Dr. Steve Rowser 00:11:39] talks about that a lot, you need to have certain protocol and accountability. That all comes down to a single document in your practice, and that's the operations manual.
I really believe on spending a lot of time developing an operations manual. I talk to dentists all over the country, all over the world really, and you would be shocked at how many people don't have an operations manual that they ever even look at. These are the kinds of people that stop running a practice, because nobody's ever doing it right. A lot of those people have never really defined what right is.
If you have it in one book, and you reference that book every single day, your protocol, your accountability agreements, the organizational chart, how things are set up. You have pictures of the ideal setup, you have pictures of what the drawers should look like every single morning. If you have something, a document like that, accountability is really easy, but then you mentioned the word leadership. Leadership is so important, also, because if you don't hold your team accountable to this book, this operations protocol, then you can't expect them to adhere to the policy of the office.
As far as recruitment goes, there's a number of different ways that you can do it. Nowadays everybody is using craigslist, but it is just like any other type of marketing, you want to gather leads first, you're going to have a funnel. A great number of people are going to enter the funnel, and then you're going to have different ways to qualify them along the way. You're going to have five or six different ways to qualify them.
You're going to have maybe one or two interviews via Skype or on the telephone, one with your operations manager, maybe one with the office manager, and maybe one with you, before they even get to step foot into the office. Once they step foot into the office, they should be interviewed by the team first. If there's no vibe, if there's no gel, if there's no culture fit there, then they get dismissed and that's the end of it, you don't have to deal with them.
If they've passed that test as well, now that's the fourth step, if they've passed that test as well, then they get the working interview, and we get to see how they work on their feet, how they interact with patients. Everybody on the team gets to put their feedback in on how they feel about this particular employee. Then we plug them into the practice for a probationary period, usually about 90 days, and we give them the operations manual, and say, "Here are your protocols, here's your accountability." If they do well, and they're a culture fit, we keep them. If not, sorry.
Howard: Go ahead.
Mark: I would have to say that I have a dental assisting school, that's another thing that I do, I sell dental assisting schools to dentists all over the country. We have 135 now. I constantly have the ability to cherry pick the very best that are in my dental school sessions all the time, so they can have a very small amount of clinical experience, but if they're a culture fit, we know that we can work with them and it usually works out great. Everybody on my staff has gone through my dental assistant school program.
Howard: I want to backup. You call this a manual or an office protocol, what did you call it?
Mark: An operations manual.
Howard: An operations manual. Is this something where a dentist listening to this podcast right now, is this something that you recommend that they go home and open up a blank word document and go through the process of writing this themselves, or is this something … Could someone have yours? Do you sell yours? Is this something you can't really buy someone else's operations manual, it's something you have to go through the process?
Mark: I usually offer mine up to anybody that wants to look at it, but these things are so customized and particular to each individual practice, that there's really a process that everybody really needs to go through. I have ways that they can contact me about the process.
Howard: You would email them yours if I'm listening to this podcast right now?
Mark: Sure, yeah.
Howard: How does a dentist driving to work right now or on the stair master, how would they get a copy of your operations manual?
Mark: Just email me at firstname.lastname@example.org, and we'll send all the PDFs over and they can put it together, and they can choose what works, and they can customize it.
Howard: True dental success, if they email you email@example.com, you will email them back a word document with your operations manual?
Howard: This might be the first time someone was glad they listened to my podcast. They're getting a free operations manual. How many pages as it?
Mark: It depends, ours is thick. I'm not going to send them every picture that we have, but I have pictures, laminated pictures of every drawer, room one through seven and those are all slightly different. We have a laminated picture of what the reception area should look like, and we check it every hour. We have laminated picture of what the panel rooms, the supply room, all those rooms should look like, and then we have protocol sheets for every position at the practice including the office manager.
We have accountability agreements, which is basically an employee contract, which says I own these four protocol sheets. There's a protocol sheet called this, this, this, this, and this. I'm responsible for that. I recognize that our core values are this. Our mission statement is this, our vision statement is this, they sign that. If we ever have trouble about performance, we can go back and say, "Look, you signed this document here, and I'm trying to be a good leader and hold you accountable. You're missing these three things." Then you can counsel them based on something that's in black-and-white, instead of this nebulous thing that I think I remember the doctor telling me that I should do it this way. It's black and white, everybody knows what they should be doing.
Howard: Will you email me that? The one with photos. I am firstname.lastname@example.org.
Mark: I've got your email, yes.
Howard: Will you email me the whole thing? I would love to see it. I'm going to play devil's advocate. I'm not asking this from my heart. I tried to guess … When we put up our 75th podcast feed, we passed 100,000 views, so it's tough when you're the interviewer because you have kids that are junior in dental school, all the way to people that are trying to sell their practice and go home and retire. What if you're driving to work and thinking, "Dude, that's anal, do you have ADD, or you are you a little OCD?" I'm going to ask you, did your mom ever tell you when you were little, Mark you're just ADD, you're too anal? You said that you have pictures of these drawers and check them every hour. Do you really think that detail of attention is necessary and a good thing?
Mark: I think it's a great thing, and it sounds ridiculously over-the-top, but if you have protocol sheets in every room. Every time we turn a room, on that protocol sheet is, drawer is checked and stocked according to ideal picture. Then you go through a checklist. Every single time we turn a room, they have to sign and physically checkoff on this piece of paper and a dry erase marker, and that is on the counter top every time the doctor walks in the room.
Mark: It sounds extremely anal, but holy cow do you get consistency. If I'm going to have 25, every six months, 25 new dental assistant students stocking my room and walking patients back to the operatory, they don't have any dental experience, it needs to be as turnkey as possible, so they know that they have these three checklists that they have to check off every single thing, and I feel comfortable having a student who's never stepped in a dental office before, bring my patient back the right way, treat them, and I know that when I walk into the room, I have the right burrs set up, I have the right tray, and the base of the chair and the rheostat was dusted, because it was all on the checklist.
Howard: I'm going to tell you an old story that was on dental town, and have you comment on it. There was a gentleman who wrote an article on dental to and posted it, he said, "I do my root canals in 15 minutes, my molar root canals." Everybody said, "Oh my God, you're a hack your horrible." Me and some other townies like Jerome Smith, we actually flew to Scott's office in Houston. What was amazing, was how he learned that, yeah you spend an hour doing a root canal because you waste 45 minutes of the hour.
You would get done with the slow speed and you would make the hatchet and take out the file and put it in here, and look for your next file, but he had three slow speeds there and his assistants were doing that while he was using the first one, and it made me realize that when you go watch other dentists … Any of my friends that I go watch them in their dental office, they can't do a single procedure where the dental assistant has to get up and leave the room to go find something three times during a crown or a filling.
I'm just like, "How did you not know, during the root canal, you'd need an apex locator? How come when you asked for this instrument, she had to get up and leave the room?" What you're saying ... I'm going to ask you this, is it a litmus test, is it a fair test to go in there and tell your staff on Monday morning, "Hey, when you bring me in the room to do and MOD direct composite on number three, the minute we go, no one leaves the room."
When I was young and more of a hothead, I always had these fantasies. I wanted to get one of those blow horns, and every time the assistant leaves the room I wanted to push this blow horn so that the office manager had to come in the room so I could just say, "Why the hell did she have to leave? All I asked for was a tofflemire matrix, and she left the room." It just drove me crazy, because I always feel sorry for the patient having to sit in their for an hour or two or three hours for something that should've taken a third of that time. Back to the question, is it a fair litmus test to say, "When I sit down to do an MOD or a crown, you should never have to leave the room." Is that fair, or is that too anal?
Mark: I think it's totally fair, but I would add something to that. What I do, when we worked with offices, and this is what I did in the beginning. You have to remember, for the very first time that I had four practices at once, it was chaos for me, because I had none of these systems in place. I wasn't able to train every single person exactly the way that I wanted to. People were running around, and wait times were an hour, just like you said.
First things first, I would say, "Hey, here's four blank pieces of paper, I want you to write down exactly what you do during a composite filling, and write down everything that you need for that. Do that for a crown, do that for a root canal, do that for a denture, do that for a partial." Then they take ownership over it, and you can create a protocol sheet and actually take a picture based on their ideal setup.
When you walk in the next Monday morning, after you've had them put this protocol sheet and picture together, if it's not right, you can look back at it and say, "Look, you created this protocol, this is exactly how you wanted it, so you got to own this. Sign this accountability agreement, and say that you will never miss one of these again, or we'll have to counsel you in case that you do. I think that's totally fair. I think that's fair.
Howard: I'm going to stand up for the dental assistant, and go against you.
Mark: Okay please.
Howard: The dental assistant is listening to this podcast and saying, "Mark, you're crazy because there's two dentists in here, and you need different gloves, and you use healing molar, and you use [tetrick saran 00:23:04], and we have two hygienists in here, and I can't assist two different hygienists and two different dentists in one dental office when everyone of you needs different gloves, supplies, composites, bonding agents." Is it fair for the dental assistant to say, "Hey, Mark, your associate, to hygienists, you all agree on one bonding agent, one composite, one glove." Is that fair for the assistant to say?
Mark: I think it's very fair, and it's a great point. Right from the beginning, when I started having multiple practices, I decided that all of the associates would use the same thing that I decided was best for the practice. We watch our overhead so carefully, that I can't have everybody using different materials for every procedure. In my office, everybody uses the same thing, and if there needs to be a compromise, we make a compromise, and we decide on one thing.
The one area where that differs, is the the burrs, and I allow our associates to have whatever type of burrs that they want, but there's a different picture for my burrs set up versus the associates burrs set up, and they know that if there assisting Dr. Garret at one point, then he's got a different burrs set up than mine, but everything else stays the same. It's not impossible to do, even if you have different materials, different setups, different preferences, as long as you have pictures of it, it's really simple. It all takes place in the supply room, and they bring it out the right way.
Howard: Why did you break protocol with burrs and not with bonding agents and composites?
Mark: Burrs, for me, I'm really particular with burrs so maybe I was biased. I only use three diamond burrs. I have a football diamond, I have a [shamp 00:24:59] burr, and I have a flame where I break contact. That's all I use. I get that certain dentists want different end cutting burrs and that kind of thing. I use a seven iron as if I'm playing golf. I use three things.
My golf bag would be the simplest golf bag ever. I use three things and my oral surgery set up is the same way. As far as burrs go, if they want different types of burrs I'm totally cool with that. It's a pretty low ticket item as well.
Howard: Mark I want to really focus on something that you're a master at, and that is overhead. Most dentists are very confused when they work hard all day long, and they go home tired every single day, and at the end of the month they find out they have hardly any money left over. I want you to start with, what would you say the average overhead is, and what could you aim for, and go through ... Let's talk overhead.
Mark: The average overhead, for American dentists, is between 60% and 72%. If you're going to follow my formula, if your overhead is up to 70% and you're paying yourself 30%, which I think is a fair compensation for what an owner should be, then you have zero profit. That means that overhead is 70%, you're paying yourself 30%, there's nothing left after you pay yourself a fair wage.
Our overheads in our offices with most of my clients, range anywhere from 48% to 58%. I think that anybody can get their overhead under 55%. That varies greatly depending on obviously the location. A Beverly Hills rent is going to be a lot more than a Chino Valley rent, where there's more horses in town than there are people. You can make up for that in other areas. If I was going to give some tips on overhead, the first thing that I would focus on for dentists, would be to focus on all areas that are not payroll related overhead items.
The two biggest always are lab fees and materials. Consumables. If you can control those, you would be surprised how out of crazy whack so many dentists get with their materials bill and lab fees. It's completely controllable. If I see somebody over ... This is so common Howard I can't even tell you. I see somebody over 3 1/2% to 4% on dental consumables every month, that's a $100,000 a month practice. That's $4000 right there that they're not paying themselves. They're actually helping put their reps kids through college instead of their own.
It's the same thing for lab fees, if it's 9%, I consistently see people 11% to 15% of their overall, so if they're 4% to 5%, that's another $5000. A lot of times I look like a hero, because I say, "Hey look, you don't have to use this lab necessarily, and you can use this lab for these tests and procedures, and you don't have to use this gigantic clearinghouse for all of your supplies. You can join a buying group like we have, and you can save 30%."
Howard: I'm going to nail you down for specifics. What do you think supplies should be, and what you think labs should be?
Mark: I like supplies under 5%. I like lab between 8 1/2% and 9%.
Howard: The first thing, this podcast person is listening, on a lab slate 8% or 9%, are you doing your crowns yourself with a CAD/CAM, or are you sending it to a lab?
Mark: It's a great question, I use a traditional lab.
Mark: I use fresh material, I do it the old-fashioned way I don't have ...
Howard: Your lab bill is 8% to 9% a month, and your supplies is 3 1/2% to 5%?
Mark: 4% to 5% I would say.
Howard: 4% to 5%, okay. How does a dentist get their supply? How you keep your lab 8% to 9%, and your supplies, 4% to 5%? Specifics.
Mark: Specifics. First of all, I make sure that I'm not paying more than $120 per single unit of crown and bridge. My crown and bridge actually averages between $70 and $80 for zirconia, Emacs, and there's plenty of great labs, United States labs with good techs, that do a zirconia crown for under $80.
Howard: Let's give names.
Mark: The lab that I use is Jet Lab.
Mark: Jet lab, the owner of that is Ray Coleman.
Howard: Is that Jetlab.com?
Howard: Jetlabservices.com. Where is that at?
Mark: Here in Utah.
Mark: The owner isn't living in Utah, but I send all of my crown and bridge to Utah.
Howard: Who is the owner there?
Mark: His name is Ray Coleman, Dr. Ray Coleman. He's a dentist, he's a practicing dentist actually.
Howard: Really, he's a practicing dentist and he owns a lab?
Howard: Is it a big lab, or is it a small one?
Mark: It's kind of a small lab, but he's really good. His ceramics are really good.
Howard: Do you just use one lab?
Mark: I use one lab, I use another lab called Encore Lab. They're a little bit pricier, but they have sometimes a half a week faster turnaround time, so if I have somebody that's got a get out of town, I'll use them. They are Encore Dental Lab.
Howard: Encore Dental Lab.
Mark: Yeah and they are also in Utah. I don't have the owner's name off the top of my head, but they're good as well. These are all labs that you can get ...
Howard: I think the better question than the lab would be what are you paying a unit on these so they could see if their lab is doing that?
Mark: I pay $77 for Zirconia. Emacs is $84 I believe. I don't do a whole lot of PSM, but the PSM's are about $60.
Howard: Okay. What about supplies?
Mark: Supplies are something that ...
Howard: Are you buying through Patterson, Shine, Ben Ko, Burkhart?
Mark: For the longest time I used only shine, and I do like Sullivan Shine, I like a lot what they do. I love my rep, and he's been with me since I opened my very first dental practice, and I was always hitting the supply budget sometimes over by 1/2%, sometimes over by 1%, but I've always, from the beginning, watched that very closely. One time, I thought I was paying too much for my gloves, I switched gloves from this buying group that I had found through one of my clients. I saved $800 the first month on gloves alone.
Then I started sending more of my invoices to this buying club and I ended up saving 30%. We saved $2700 the first full month that we used this buying club. I still use Sullivan Shine for a lot of stuff, but I send all of my invoices to this buying group. This buying group tells me what they can beat as far as price wise and what they can't, and if there are substitutions, I'll try the substitutions for a month, and if I like it ...
Howard: What is this buying club? What is the name of it?
Mark: This one's called Synergy Dental Partners, and it's Rick Offutt is the owner. He's a doctor as well. These are all dentists that own these.
Howard: Synergy Dental ...
Howard: ... Synergydentalpartners.com.
Mark: Yeah and it's ... I don't know what their names are ...
Howard: You are saying it's owned by a dentist.
Mark: Yeah, it's all dentists.
Howard: What's the dentists name?
Mark: Dr. Richard Offutt. I have his phone number.
Howard: Where is he out of?
Mark: He's on the East Coast somewhere, 704 area code if you know what that is.
Howard: Okay, 704 ...
Mark: 609 ...
Howard: 609 ...
Mark: 8939 ...
Howard: 8939. Do you buy almost everything through the Synergy Dental Partners?
Mark: I would probably say about 30% to 40% I still get from Sullivan and Shine, because I get a multiple practice discount from them, but anything that I buy through them, I send the invoice to Synergy, and if they can beat it, they beat it. The reason they are able to do that, is because we have this volume discount that comes in from a bunch of different dentists just like you and me that come in through this buying club, and they have special deals for recruitment from these different clearing houses.
Howard: Do you also by 30% from Sullivan and Shine because you want their repair man relationship, their maintenance relationship to?
Mark: No, it's because they actually have the lowest price on those items, because they get a special deal for multiple practices, but it is nice to have ...
Howard: You're going where price is king, you're going to buy at Costco if that's cheaper than Kroger?
Mark: Absolutely, but I always do check to make sure … There are bonding agents that I have tried that was just crap. There was cement that I tried that just wasn't good. I have my favorite brands still, but once I get my favorite brand I still want the best price for it. I don't think people realize that a certain rep will walk into a business with 18 dentists, and the guy they play golf with will have a totally different price than the guy on the third floor who's office manager never lets him talk to the doctor.
It's crazy how much profitability margin there is, and how much fudge factor there is in there, and how much they can actually work with price. If my rep is listening I'm sorry, but the reality is there's a lot of profitability hidden ...
Howard: You know what the grand earthquake was in all of this ... In America the largest distributor is Walmart. Number two is Costco. Number three is Kroger, for grocery store chains. Kroger, they don't change the name to Kroger. In Arizona its Fries, in Kansas if Dylan's. Number four is Amazon, and Amazon just signed up to the Dental Trade Manufacturers Association. They're joining, and those people are saying that Amazon Prime is going to get into the dental supply business, and it was an earthquake.
Imagine you're a dental supply house, and Jeff Bezos doing $90,000,000,00 a year says, "Wow your margins are really high, I want a piece of that."
Howard: That's going to be a total game changer, in fact I want to go to the next Dental Trade Manufacturers Association meeting just to see what their strategy is. Can you imagine going to bed one day knowing you're a millionaire, the next day Jeff Bezos of Amazon is going to be competing against you?
Mark: It's crazy.
Mark: The bottom line Howard, is that if you think about the benefit that corporate has over us. First of all they understand how to keep overhead low, which is huge. They have relationships with the big clearinghouses usually, or they own their own supply companies right? Then they have these sweetheart deals with these huge labs where their shipping is usually free, and they get 30% to 40% off retail what us dentists are paying for.
If you could create a corporate environment within your small one doctor two doctor dental office, you could get all the benefits of corporate, and then you learn how to run your practice efficiently with an operations manual, which is what these CEOs are getting paid $350,000 for, and sometimes up to $1 million for these corporate chains. If you could figure that out, you could get all of the benefits of corporate, without selling your soul.
Howard: We're coming up on 200,000 times. We were at 198,600, and we're just shy of 4 million posts. You've been a towny for a long time, would you ever start a thread and post that manual, so that all these townies listening could find it on dental town, and then everybody could discuss it?
Howard: Could you make your inaugural virgin post?
Mark: Maybe it would be a great way to start. My first thread would be to post the operations manual out there. [crosstalk 00:37:35]
Howard: Also, we have put up 307 one hour courses, and they just passed 500,000 views, because a lot of overhead people don't want to close down their dental office to go to a course, but I would give anything if you would do an online CE course, or even a series, because I've been to your seminars, you're an amazing instructor.
Mark: Well thank you.
Howard: You're an amazing teacher. Would you ever consider making an online CE course to?
Mark: Totally, I would love to work with Howard Holstein, that would be great.
Howard: Yeah absolutely. I want to challenge something that you just said. You said, to get overhead, the ADA says overhead average on their last survey was 64%. You said 60 to 72%, so that's right in the range. You said you can get down to 48% to 58%, and that you should focus on lab and supplies. My job is to guess what these individual dentists are thinking when they're driving in their car to work listening during these hour commutes.
Their thinking, "Mark, dude when I get done paying payroll, I don't care what the light bill is, I don't care how much I pay for gauze, sometimes I can't make payroll, sometimes I have to delay payroll for two days." Talk about payroll, what if this dentist is thinking her payroll is too high. What should payroll be? Do you just have one number for the whole staff, or do you break it from front office, to dental assistants, to hygienists? The million dollar question, how do you pay your hygienists? Is that an hourly thing? A production? A percentage? Your associate, do you pay them a wage, or a percentage? Let's talk about labor, which is the biggest expense.
Mark: Yeah so overall I'd say 30% is acceptable for payroll.
Mark: 30% total I think.
Howard: Does that include the associate dentist?
Mark: That does not include the associate dentist, but it does include hygiene. If you're going to break that down, specifically, hygiene should be about 9%. If you're looking … I have my little chart here. Staff salary, non-hygienists, non-associate, about 16%. Hygiene, 9%. Payroll taxes about 2 1/2%. Fringe benefits about 2 1/2%. Add all of those up together and you get about 30%.
Howard: You said tax, that's FICA matching with the payroll taxes?
Howard: What was the other one you said? Benefits?
Mark: Fringe benefits, 2 1/2%. That might be on the low end.
Howard: What is a fringe benefit?
Mark: I would consider that, like for my office, whatever percentage you pay for medical insurance, and then a 401(k) match perhaps. About 2 1/2% of total payroll.
Howard: Do you provide medical insurance, and 401(k)?
Mark: We pay 50% of medical insurance benefit if they choose to accept the plan, and then we give 3% match on 401(k).
Howard: That's exactly what I do, and the reason I did that was because so many of my staff for the last 28 years, when I paid for the whole medical, I'd say, "I would pay your medical." They would say, "I don't care, my husband has medical."
Howard: I thought, if you don't care, then let's cancel the plan, I don't know why I want it anyway. Then when I went to, "Okay I'll pay half", everybody who had a domestic partner, and wanted their medical because they worked at some bigger company or government, they dropped out of it. I think they should have some skin in the game, and we do the 401(k) matching up to 3% to.
Mark: I had this thing, I don't think people really realize the benefit of the 3% match. Whatever that 2 1/2% is, I think they'd rather have a $1 raise, or an extra bump at the end, but I'm doing this for their benefit. I know that sounds condescending, but I don't think people realize the value of a 3% match in stocking money away that you never see, and the tax benefits of it. I'm just doing that because I think that's the right thing to do. They would rather have a $2 raise, but that's just going to get pissed away anyway.
Howard: I don't want to throw my fellow dentists under the bus, because I'm not here to be your friend. I've always been politically incorrect, because I think so many politicians and people are lying to you, telling you what you want to hear. I think when someone tells you what they honestly think, I'm old school, I think that means I'm your friend. I think your mom or your dad or your brother or your best friend will tell you what you don't want to hear.
I see so many dentists talking about how their conservative, and this and that, and this and that. They are against Obamacare, and they are against every government handout helper thing there is, and say, okay you are a free enterprise so then you're going to do that right? They don't have health insurance, they don't have a retirement plan, they don't have ... I'm like, "Buddy, someone's got to do it, the governments either got to do it or you're going to do it, so don't say that you're conservative and the government should stay out of it, then don't do it for your own ..."
I can't believe how many consultants out there who think they are holier than thou and all of this stuff, telling people do not to provide medical, 401K, no retirement. It's the same ones on Facebook posting anti-Obama, anti government. Someone's got to help these people, and you're right, I have grinned several times, because I've got staff that's been with me for 28 years, and those retirement accounts are getting huge. Going back over those 28 years, when they stumbled with a divorce, or some with their housing, and they came to me and they wanted to cash it out, and I just fought it tooth and nail.
I said, "Right now, you can get a job, right now you can get a part-time job at McDonald's, or Walgreens, or Walmart, but there's going to come a day when you can't do anything. There's going to come a day when you've had two new hips and two new knees, and you're sitting on the couch swollen, and you're going to be saying, "I'm lucky I worked for Howie, because he did this 401(k) ...", I get great satisfaction out of knowing that I was right in the long run.
Mark: I couldn't agree more.
Howard: Basically after labor, lab and supplies, is there anything else you should focus on in overhead?
Mark: You've got office expenses, which is about 1.2%, 1.5%, which is your paperclips, and your ink, and your paper and all of that sort of thing, it's probably going to be lower if there's a paperless practice. That's an insignificant amount. Another biggie is facility, about 9%, and that's going to vary hugely. There are certain things that you can control.
When I say control non-payroll overhead bursts, that's because I tried to get my clients to make their dental teams the highest paid in the area. Usually, that's not my base pay, that's my incentive pay. We base all of our incentives, whether that's for the hygiene program, or the rest of the staff, we always base incentives around overhead.
They get 2% of collections if their overhead is between 48% and 53%. Yeah 2%. Anything under 53% to 59%, they get 1% of total collections. By God Howard you would have no idea how tight we run that ship, because they won't put an extra 2 x 2 on the tray. Their cloth is usually too short, because they're so ... My contact paper is teeny now, I used to have two dry angles on every tray, now they just put one, and then they put a jar on the counter top because most of the times you don't even use a dry angle.
They are watching every single expenditure in the office, because they don't get that incentive unless the overhead hits the right number. I would gladly give 2% or 3% of my total profit to them if I knew that I was still going to be profiting around 45% or 50%. If I was going to be taking 45% or 50%.
Howard: Would you close that bonus system on dental town to?
Mark: Oh sure.
Howard: We have 51 forms, root canals, fillings, crowns, practice management, that would be amazing. Would you put that on your thread where you start the office manual, or would that be a separate thread on the bonus system?
Mark: Yeah it's funny, I was listening to you talk to Jim, or Tim, the guy that had 22,000 posts on dental town. I was so impressed that he had so many, and you were talking about ... What do you suggest you do if you've just been shy about posting in the past, and I think I'm of those lurkers that you guys were talking about, and I just wasn't sure if there was anything valuable that I was saying ...
Howard: Oh my God.
Mark: ... You've given me so much ammo to put out there, but I think I would be happy to start a thread now.
Howard: That would be so amazing. I want to go back to stress for these dentists. A lot of dentists, they sit there and they're looking at you. You're pretty boy in a suit and tie, and you are all that, and they're sitting there thinking, "Mark, I almost get nauseous if I thought I had to go in and talk to my hygienist. My hygienist came in and asked me for a raise, and I just wanted to puke in the trashcan."
What would you say to a dentist that says, "I just want to go in my private office and shut the door? You're out there, and you're selling a bonus system, and you are leading them all, and I'm just not a leader." What advice would you give to me if I'm not a leader, and I own my small business? How am I going to do all of this? The question is, would you just say, "Dude, you need an office manager." If you can't do it do you use an office manager?
Mark: I do, we have office supervisors, and then we have an overall operations manager for all of the practices. I would say, back to your point, I would say my favorite quote in the world is, "Your level of success is directly dependent on the number of uncomfortable conversations that you're willing to have."
Dentists, doctors out there, if you're unwilling to have uncomfortable conversations, you'll never be successful. This is my tough love part of my talk with my clients. Look, you're telling yourself in your head that you're not a good leader, you're also telling yourself, when you say that, that you are never going to rise in success beyond the level that you're at right now.
Whatever it is that's going to get you to have uncomfortable conversations ... The top 1% of the dental profession didn't just get there because they hid in their office. If that's what you want, you have to go out there and get it. The first thing you have to learn how to do, is to have uncomfortable conversations. That is the one thing, I don't think you can delegate 100% to an operations manager, or a supervisor, or an office manager. You've got to grow some you know what and get out there and have those difficult conversations.
If you can't do that, I'm sorry. Now there's some resources where you can actually work on that. I have dentists that I couldn't get them out of their shell, they joined Toastmasters. I have dentists, one of my favorite books is John Maxwell's 21 Irrefutable Laws of Leadership. You can listen and watch so many great resources on YouTube. Just look up leadership.
I watch a Ted talk every single day when I'm working out, and I'm always constantly trolling YouTube for inspiration, and better tactics for leadership. I was not born a natural leader, I was a kid with ADD that was an average student at best. The only thing that I was good at was sports, but I just got over it. One of the most horrific things in the world that I could have imagined in my past history, was getting up and talking in front of people. Now I do that for a living, so it's just a matter of getting out there out of your comfort zone and knowing that you're going to have to have those conversations.
Howard: That's why you need to do an online CE course, because there's about 240 different dental organizational speakers, and most of them are nonprofits, and they'll go into a room and say, "Okay, we need volunteers to pick the speakers for next year's convention." Three introvert dentists raise their hands, and this is what they say to them, "Give us someone on Endo, and implants." Then the number one complaint at every convention ever given, is that there's nothing for the staff, so they always have to have a practice management, and don't get the one we had last year or the year before, get someone new.
These dentists don't know what to do, so they'll go to the online CE, and they'll go to ... Say you had to pick the Endo of speaker. There's like eight one hour courses by eight different guys, and they'll listen to eight guys, and it's like their demo. I had one guy put up a one hour course and he got booked for 76 invitational's from here to Kathmandu in one year. That's your demo.
Howard: If you're listening to this, I've already heard Mark, I've heard him in Scottsdale, I know this guy. If you're looking for a speaker in practice management, this is your man. Go back and finish, how do you pay your hygienists and your associate dentist?
Mark: Great question. Hygiene is a typical $40-$48 an hour depending on the hygienist, and depending on how long they've been working. The most inexperienced hygienist that I have makes $40 an hour all the way up to $48. Once again, there's always an incentive for them. Their baseline goal for the day, we always have production goals, but the hygiene baseline production is three times their hourly salary, so if they're working eight hours a day, they're making $40 an hour, that would be $120 times eight. $960? That's the minimum amount of production that we expect from them.
Any number above that, they get 15% of that. If it's $960 and they've produced $2000, which is usually where we come in, $1600-$2000, then they'll get $1000 times 50, the get an extra $150 that day. We do a single day, and then we close it out, then they get paid a collective bonus at the end of the two-week period, first to the fifteenth. That's hygiene.
Howard: That's intense. I'd say the average hygienist doesn't even do $1000 a day.
Mark: My hygienists do between $1600-$2200.
Howard: What do you think the average hygienist … The dentists are trying to do the math their head, the average hygienist does $1000 a day, how do you get yours doing $1600-$2000?
Mark: It wasn't always like that. I think before our incentive program, they probably averaged about $800-$1000. When we got the incentive program in place, and we gave them some tools to increase the revenue in the hygiene department, I think that it really took off. Another thing is that you don't have to over diagnose to be a really profitable hygiene department, you just have to give the hygiene department some adjunct areas that they can increase their revenue.
Obviously adults [inaudible 00:52:59] we've all heard that, adults fluoride is a really big one. I see a ton of people at the [inaudible 00:53:04] because we have an aged population here, and they get root caries. It's almost mandatory in our office that every time those people come in, if it's a three, four month recall, they're always getting adult fluoride.
You can also sell physical products. You can sell spin brushes, and you can sell [inaudible 00:53:25]. Any little thing that you can ... Desensitizing agents ... Anything that you can use to increase the revenue per hour. We know that the person that's scheduling the appointments, the hygiene coordinator, and the hygienist know that somehow $120 has to come out of the operatory for that hour that she's working. They do everything that they can to make sure that they hit that number.
Howard: $120 an hour?
Mark: $120 an hour. If she's making $40 an hour. If she's making $50 an hour, then it would be $150 an hour.
Mark: I have no problem paying somebody $45 or $50 an hour as long as they can maintain that baseline for me.
Howard: Which is times three their labor?
Howard: For every dollar that you pay them, times three, you need to Gross at the door. What about your dentist?
Mark: My dentist is a straight 30%, -30% lab fees. They eat what they kill. There's no guarantee. They get 30%, and I take 30% of their lab fee off of the production. We have 99%-100% collection percentage, so I see no point in paying them on collection. I know that my billing department is tight, so we pay them on production. I might lose 1/2% or 1% here or there, but they're happy. Were getting 80 to 110 patients per practice, there's plenty for everybody to do.
Howard: How are you getting 80 to 110 new patients? What is your market? How are you getting these people in the doors? Is it good demographics? Good location? Good visibility? Are you a master at marketing?
Mark: I wouldn't call myself a master, in all fairness I have to say that my demographics are favorable for sure.
Howard: I'll say to that, you were born in San Diego, it's not like you tripped and fell and landed in Prescott.
Mark: That's right.
Howard: You went out and found where you wanted to create a supply where they were needed, where most dentists just say, "Well I'm going to, I just want to have a dental office that looks out over the ocean, and I want to live in Newport Beach." They don't take into consideration, well maybe there's only 300 people for every dentist in Newport Beach, but if you go an hour inland, to Palm dale, maybe they need you in Palm dale or Bakersfield.
A lot of dentists ... It's like a lot of people tell me, and this just gripes me, where they say, "You just got lucky, you set up in Ahwatukee in 1987." I'm like, "Dude, I was born in Wichita Kansas."
Mark: Yeah. That was not luck.
Howard: I didn't have my go kart breakdown, and then get stuck 1100 miles away. I found it, and I moved there, and it was a great sacrifice to move away from my best friend, and idol and role model father, but I just thought there wasn't nearly any opportunity in Wichita, because the population had been the same for 20 years, because every time a girl got pregnant, a guy left town, and I wanted to go to the town that everybody was going to, which was exploding Phoenix.
Howard: You and I did not get lucky on demographics, you and I went in search of demographics, and we went where they need a dentist.
Mark: I would say that a lot of that was research-based. That was intentional. Here's my take on marketing Howard, what works in Ahwatukee is not going to work in Prescott for sure right? It all comes down to calculating ROI on anything that you try. Some markets, radio is the best way. Nobody listens to the radio up here so that would work. In my market, print media works very well. Coupons that they cut out of the sports page, that's what works in my area. It probably wouldn't work in Ahwatukee, but it works really well here.
The only way I know that, is because every single thing that I put out into the universe, I tracked what came back in, and I calculated ROI. For every dollar that went out, I wanted a 3 to 1 ROI for everything, and if it wasn't, my bill board pulls 3 to 1.
Howard: Is it a 3 to 1 Gross sales, or net income profit?
Mark: Gross sales.
Howard: You're talking about gross sales. If you put $1 on a billboard, you want to get $3 back that month, or you're going to pull the billboard?
Mark: That's right.
Howard: Your billboard is a return on investment up in Prescott?
Mark: Yeah. It's funny, because I wanted so badly to get, up in Chino Valley, I wanted to get on the highway, but at the time I couldn't afford a building right on the highway, so my compromise was to get a building a block off the highway, a nice 2000 ft.² building, but then I calculated that I could afford this billboard by getting a block in, and it's worked really well.
Howard: We should do an experiment on that billboard, and we should take your face off it, and put on mine, and see what that would to the return on the billboard. I wonder if you'd have to pull the billboard ad after the first month. I've only got you for two minutes, so I've got two more questions. Number one, tell us about that dental assistant school, and how they can find out more about that, and tell them, in a big close, how could this dentist listening to the podcast get you, Mark the man Kostis, to help them individually?
Mark: The best way to get in touch with me, and thank you so much Howard, the best way to get in touch with me is just to email me directly at email@example.com. If you go to truedentalsuccess.com, which is the main website there, just type in your email address, and I'll shoot you out a free book, and a free video called Cracking The Top 1%, which is one of my keynote speakers, I think probably from the event that you were at Howard, when you spoke so graciously and so awesomely at my first event.
They'll get a keynote video, and get a free book, and then with that we can set up a free consultation, and I'll analyze all of their numbers ...
Howard: Now was that video on YouTube?
Howard: When you make a post on dentistry, we have a YouTube button, so if you go to your YouTube and click share, and click embed, you can cut and paste that, drop it in the deal, and that whole video is right on your thread, so they could watch that keynote speaker, because that is an amazing lecture that you gave, and I really like that. You have truedentalsuccess.com, but you have horizondds.com.
Mark: Horizondds.com is my practice website, and then I have teachdentalassistants.com. Teachdentalassistants.com, if they're interested in the dental assisting school.
Howard: We are in overtime now, so just real quick, what's the story on the dental assisting school? Tell us about that for a minute.
Mark: I'll tell you straight up, it's the ability to monetize your building, your practice, your physical facility, when the practice is closed. Imagine, you go home at 5 o'clock, if you had another business that opened at 5 o'clock once you went home, that's what the dental assisting school is. I know a lot of dentists are thinking, "Gee, I don't want to sit there and teach a bunch of rookies how to suck spit." The bottom line is, we have our staff, and it's completely turnkey, the staff runs the school in your reception area, and then have a lab in your operatory from 5 o'clock to 8 o'clock at night, two times per week, or on the weekend, and you can learn how to repurpose your facility when it's closed anyway.
Howard: How much do you charge to become a dental assistant? How long is the program?
Mark: The program is 13 weeks. I charge $3000 per student. We average between 10 and 12 students, four times per year, obviously this is mine which is been there for a while, but the overhead is between 15% and 18%, which is sweet compared to dentistry obviously.
Howard: You know what business I did?
Mark: What's that?
Howard: To repurpose my office, you know on breaking bad, when he started making meth. What we did, is we take the Novocain, and convert it to pure cocaine and then sell it at the back door of the office after hours.
Mark: Nice, that's a good ...
Howard: We just had to hire one chemist, I'm kidding. We live in the country of Sheriff Joe, I'd be shot [inaudible 01:01:35]. Hey Mark, love you to death. Your a class act. I like everything you're doing for dentistry. While a lot of people are thinking we're losing to corporate dentistry, you're just crushing it on so many levels, you're just smart, your intelligent, here in my backyard everybody I know loves you. I hope to see your first inaugural post on dental town. I know that if you put on an online CE course, and buddy seriously, on behalf of dentistry, thank you so much for everything that you do for dentistry.
Mark: Right back at you Howard, I'm so happy to be friends with you.
Howard: All right buddy, we'll see you around.
Mark: Take care, talk soon.
Howard: All right, bye-bye.